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10 Characteristics of Good Passive Income Streams

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Every successful venture has its own rules book. The rules stipulate the characteristics that make it successful. Today we are having a look at the characteristics of good passive income streams. We all know that passive income is income derived with little effort. 

The ‘effort’ is determined by the material participation test. The material participation has its own guidelines as discussed in the Passive income 101 article. Once these tests are passed, that is when income received from these streams is considered as passive income. Just like the flavors of fruits, the passive income streams are diverse. So let us look at what makes them all credible passive income streams.

  1. Correct Function

When selecting a passive income stream you have to make certain that it supplies a tangible demand. The stream that you select needs to fulfill a certain function that is valuable to your customers. Selecting an income stream with a short shelf life will not do you justice. You would have wasted your time and resources.

A stream that is able to fulfill long-standing demand will prove more profitable in the long run. Remember that passive income relies on recurring activities to make the trickle of money turn into a viable stream.

  1. Safety

When you spend your hard earned money and time, you always want assurance that the investment will be profitable. You want to invest your time in a passive income stream that is secure from untimely death.

To make sure that your passive income stream is secure you need to install strong and fluid business structures. You want to make sure that the platforms that you use are scam free and that the payment systems are secure. You want an income stream that allows you to reinvent and expand without breaking it down or facing too many obstacles. If you have automated your systems make sure that they are air tight.

  1. Growth

Every passive income stream must have the ability to grow. The difference is how large they can grow. In some countries, books are more profitable while in some real estate crowdfunding works best. You need to look at the passive income stream and determine if it will grow to the heights that you expect. If you have a lot of money and time invested in an income stream, it should provide you with credible returns.

  1. Marketing and advertisement

How much marketing and advertising does the stream need to be noticed? There are products or services that are easy to push to the market and others that need time and resources. You have to be certain that you will be able to effectively provide proper advertising and marketing mechanisms.

The marketing platforms you use will affect your sales volume. For example, a tutorial related stream will not require as much effort as pursuing an affiliate marketing stream. Affiliate marketing may need a lot of advertising and adequate platforms.

  1. Diversification and compatibility

An income stream that is able to grow into other sub-streams or be compatible with other streams is an asset. For example, if you have uploaded online classes for people to view, you can offer extra support for extra value.

You can add related eBooks and extra tutoring for those who need it. You end up diversifying by offering different products just from one stream. This how the trickle of money turns into a stream.

  1. Resources

When it comes to passive income you have two resources. Time and money. There are streams that require a lot of your time to get off the ground, for example writing an eBook. Then there is those that require capital to get off the ground such as real estate. An income stream that utilizes the resources and offers returns on a scalable level is to be considered.

  1. Support & Maintenance

Are there applications and software that can support the passive income stream? Automation requires the use of the software. This facilitates fluid and secure transactions. Applications make ease of use attainable. Select an income stream that cam be easily automated. This way you can create more time to attend to other things. Low maintenance automated systems make the ‘passive’ in passive income is effective.

  1. Limitations

Different passive income streams come with different tax stipulations. There are passive income streams that are not even taxed(some affiliate marketing schemes) and there are those that are. For example dividends and bonds face entirely different taxation systems.

A good passive income stream should incur relatively low taxes but still have a good rate of return. High taxes are liable to affect your net income. Confirm with the tax rates and make an informed decision.

  1. Targeted returns

How much are you aiming to make? As stipulated before not all income streams produce the same rates of returns. There are those that offer rates of return in the long term like dividends and those like peer lending that offer immediate returns. Whatever amount of money you want to make, make sure that the method you select will get you there. And that it won’t take centuries to mature.

  1. Fit

Just like careers, passive income streams have a fit. If you have no interest in the real estate sector do not indulge in passive income streams of that nature. Find a passive income stream that you have the knowledge and possible experience with. This way you will not run out of new ideas of diversifying.

Your work will seem like play and you will be able to create money out of it. Our social media gurus found the right fit for themselves and created brands. Your passion can turn out to be a great way of creating passive income.

Take your chances and explore the avenues that you will enjoy working with. All the best in your upcoming passive income ventures.

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